Bloomberg News

Cyprus Has Enough Funds Without Russian Loan, Official Says

November 15, 2011

(Updates with comment from economist in sixth paragraph, finance minister in seventh.)

Nov. 15 (Bloomberg) -- Cyprus’s government has enough funds to finance this year’s obligations without a 2.5 billion-euro ($3.4 billion) loan from Russia, the head of the public debt management office said.

“The Republic of Cyprus already has sufficient liquidity to comfortably cover all remaining needs for 2011,” Phedon Kalozois, who is also economic director at the Finance Ministry, said in a telephone interview today. “We recently had a successful issue of treasury bills and sold some short-term bonds to foreign investors who contacted the ministry for this purpose”.

Russia agreed to lend 2.5 billion euros, with the last tranche to be disbursed in March, Cypriot Finance Minister Kikis Kazamias said this month. Kalozois didn’t disclose the exact amount of cash available in the east Mediterranean island’s consolidated fund, used to cover salary payouts, capital expenditure and other operational outlays.

The government held 678.2 million euros in deposits on Sept. 30, compared with 660.6 million euros the previous month and 498.8 million euros in January, according to a statement on the Central Bank of Cyprus website.

The yield on the Cypriot government bond due February 2020 was at 11.26 percent today, compared with 5.8 percent at the start of the year.

The loan, which amounts to about 14 percent of the Cypriot economy, may benefit both countries as it gives Cyprus time to put its budget in order and will allow Russian companies to continue using the island as a vehicle for their domestic investment, according to Alexander Michaelides, director of the Center of Banking and Finance at the University of Cyprus.

Kazamias said on Nov. 11 that the loan from Russia was agreed “with the most transparent procedure.” He said he discussed the terms with European Union Commissioner for Economic and Monetary Affairs Olli Rehn and that the “‘explanations we gave satisfied him.’’

--Editors: Fergal O’Brien, Andrew Langley

To contact the reporter on this story: Stelios Orphanides in Nicosia at sorphanides@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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